Predicting Stock Return with Economic Constraint: Can Interquartile Range Truncate the Outliers?

Table 6

Portfolio performance and Statistical performance over the business cycle.

	Statistical performance				Economic performance
	Recession period		Expansion period		Recession period		Expansion period
	Original	IQR	Original	IQR	Original	IQR	Original	IQR
DP	1.779	2.459	−0.727	0.016	6.655	7.243	−3.116	−3.015
DY	2.696	3.301	−1.477	−0.823	12.141	12.216	−4.322	−4.322
EP	−2.199	−1.780	−1.203	−0.445	9.467	9.467	−1.100	−0.951
DE	−2.641	−2.013	−1.041	−0.229	−1.090	−0.152	−0.128	0.079
SVAR	0.662	0.838	−0.024	0.835	0.304	1.284	−0.288	0.036
BM	−0.374	0.188	−1.853	−1.148	9.560	9.560	−4.144	−4.090
NTIS	−3.716	−2.511	0.454	1.309	−0.036	0.948	0.614	0.903
TBL	1.288	2.127	−0.364	0.393	9.782	10.774	0.113	0.249
LTY	0.587	1.341	−1.123	−0.379	8.379	9.367	−0.672	−0.554
LTR	0.877	1.462	−1.339	−0.404	7.975	8.041	−0.651	−0.327
TMS	0.888	1.789	−0.174	0.714	8.185	9.178	0.435	0.760
DFY	−0.172	0.640	−0.167	0.631	1.958	2.941	−0.790	-0.596
DFR	−0.587	0.076	−0.071	0.690	1.681	2.350	0.463	0.630
INFL	−0.419	0.374	0.066	0.851	2.927	3.907	−0.212	-0.038